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tv   Worldwide Exchange  CNBC  October 12, 2018 5:00am-6:00am EDT

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breaking news. wall street is pointing to a major bounceback after the dow dropped nearly 1400 points in two days the relief rally spilling overseas where it's a sea of green in asia to europe. so is this the all clear sign for your money is it safe to get back into the market we're going to find out. it is friday, october 12th, 2018 "worldwide exchange" on cnbc begins right now
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>> good morning. brian sullivan is on assignment today. we have mainlior relief rally under way. as you can see, the u.s. futures picture is pointing to a solidly higher open. the dow looks like it would open up by 300 plus points if things stay the way they are right now into the opening bell. the s&p 500 up by 35 nasdaq up by a whopping 130 points as for the bond market, those treasury bonds are slightly on and off this morning that means rates are on the rise if you take a look at the two year note, right around 2.87%. the ten year note yield, 3.17% as well. now this bounceback is going global asia posing a pretty big turn around here as you can see the shanghai composite up by 1%. hang seng in hong kong, 2% and that's carrying through into europe as well we check out the major markets over there we're seeing a bipt oft of a bie there.
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let's get more on that big turn around in europe we have the latest karen? zblfr good morning we got off to a good start in europe it was green straight out of the gates. but some of the gaunz ains are holding. we're waiting to see how the u.s. open up we have italian budget and we know how noisy that event has been also, we're getting prepared for some form of a brexit breakthrough come monday so huge risks for the major indices. so we're not holding up on the high levels. but the gains are still relevant if you look at the year to date performance, we did get some of the debt of the 2018 levels on the stock market the core market of germany, for instance, right down below the february and march levels we saw in the markets when volatility hit the global market. italy has been the embodyment o
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the falling knife. elsewhere, we push on to this whole debate about whether investors should be in defensive mode what is performing to day is the real cyclical part of the market it is basic resources, for instance you're seeing gains in travel and leisure and also retail strong sector. weaknesses really come into the trade around utilities, telecom, household goods. i want to take you to the bond market it's been relevant globally. we're seeing the yields like clockwork today. well oiled machine you see german bonds, that safe haven trade sold off the yield starting to rise in germany. we did see a little compression in the market too. the southern european market of italy where there has been some market moves coming up to that budget and it's been risk off. the yields actually spiked to about 3.62% at its worst yesterday. really come right back on. that we'll improve by eight basis points so better territory to navigate here in europe today but there are moumentains to clm
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come monday. >> thank you so much for the late theft, karen snow let's turn back to the state side of things futures right now in rally mode. dow opening by 300 point gain if things do hold right now into the opening bell the s&p 500 up by 35 points. the nasdaq you can see there a big bounceback, 131 points to the upside let's bring in matt mayhle now the equity strategist over at miller taback. matt, is it fair to say this is the all clear sign or do we still have worries out there about the damage that's been done to the markets over the last two or three days >> well, there is always you have to worry when you get that kind of a severe decline over such a short period of time. however, i think things were getting washed out here. we saw yesterday when the market looked like i was going to bounce back in a strong way and got back into positive territory. the ecb came in and said things about italy that were a little zparn disparaging. i was watching the advance decline. it improved late in the day.
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and for the entire day, it was much better than the previous day. and of course volume really serves over the last two days. i did see a sign of capitulation on a short term basis. i think we'll bounce back today. that is going to be very important. we're focused on the 200 day moving average which is very important. but the 50-week moving average is also a level that the s&p 500 is slightly below. it's important we regain that i by the end of the day to day on a technical basis. but again, longer term, we'll see what happens shorm te short term, we washed things out. >> matt, capitulation is a strong word. that implies this is it. this is the bottom and this is the all clear sign what were the words of capitulation that you did see? >> you see short term and then on a stair step fashion. so i do think we could see a little bit more weakness and, you know, the old saying, no market moves in a straight line but it is an accurate one. again, you saw that huge
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increase in volume you saw, you know, with it just a straight down move and the bids just disappeared. it's funny, everybody talks about this panic people sell, sell, sell. but it's also a situation where bids just disappear. that is something we saw yesterday. the thing was this bounce this morning, of course, you don't want it to bounce too much people may sell into it. i wouldn't be surprised if we saw a mid morning dip. i think things are a little washed out i think we'll rally before the day is over. >> we talked about this tie, this trading relationship between stocks and interest rates for a while now. interest rates are on the rise lately, that's meant that stock markets should be falling. so what gives here is this just a technical reason why or perhaps maybe break tlag trading relationship or correlation? >> well, to be honest, it's funny, the blame game is going on the president was blaming the federal reserve for being too aggressive we need to get away from that. we need to get away from the thought that what the fed is doing or even what the president is doing with china is a
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mistake. we don't have a god given right to have a stock market go up all the time the fed lowered rates to an abnormally low level to save the system ten years ago now they're raising it back up they're normalizing rates. the president -- everybody on both sides of the aisle is saying that china has been cheating okay he needs to be tough with them just because they're doing something that might cause a stock market to go down 10% or 15% or 20% doesn't make it a mistake. okay the market is rallied 300% since president -- the election day for the president. i'm sorry, 40% since then. 300% if the last ten years a little bit of a pullback is normal and healthy i think the fed is doing is the correct thing. just because it might eventually make the stock market go down a little bit doesn't make it a mistake. >> all right thoughts there on the markets overall. perhaps not the panic mode that some people want to attribute to what is going on in the overall
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scheme of things thank you so much for joining us this morning thanks >> tech is major factor in this wild week on wall street the nasdaq pointing to a big rebound. big name tech stocks are absolutely crushed this week as you can see there. let's bring in dan ives, the managing director the aweat webh securities we've been talking about 100 days and 50 days and all kooint kinds -- kinds of technical areas is this a point where the very popular tech and communications services names are attractive given the pullback that's we've seen >> yeah. especially going into earnings over the coming weeks. i mean fundfundmentally, i thin valuations got ahead of themselves you're seeing the risk off trade. it's been a white knuckle period
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n te in tech stocks, you could see a 2% down side but they will be higher year end. >> when you say valuations, we've been talking about this idea that interest rates are playing so much into the valuation discussion, especially for tech as interest rates rise, the metrics and inputs you value stocks by start to change. as an analyst, when you assign a target price or a level or a buy recommendation to a stock, how much of that interest rate picture is playing into your thought process? >> look, it's definitely obviously a factor i think the most important thing too is about growth and overall metrics in the market. i think what happened here is in tech, given the secular growth names, you're starting to see just transformation on growth that we've never seen in the last decade. when you look at cloud computing, cybersecurity, big data, but in terms of valuation, you're starting to see the valuations get stretched and now it's starting to happen is you're seeing a compression, the risk off trade
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that's why the tech analyst i think someone covered the last two decades, you can historical metrics relative to growth that's where you know it's time to pound the table versus times where, you know, this thing could continue >> so your job is to assign target prices. within your coverage universe, i mean tlshgsz mean, there's a lot of big names in there given what we've seen, what represents the most attractive opportunity to get in and perhaps either start building a position or add to one that's you already have >> i encourage when you look at the trends, you know, you have seen consumer names very weak and social media and some of the traditional f-a-a-n-g names. but when you look at enterprise, there are secular themes on cloud computing, big data and cybersecurity that we believe are sort of the areas that investors should be focused on the other thing point out is if you look at the softness that we've seen with high flyers down 30%, i think it's really going to be a catalyst for m & a here in tech. so i think that is something
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where i think you have a lot of boards and ceos right now sharpening pencils and looking at the tech stocks that are down 30%, 40%, sometimes 50%. that could be a catalyst for m & a. >> when you look at the tech stocks down a lot, many of them over the course of the past five or six months have been semiconductor related. as a technology oriented analyst, is that one of the tea leaves that you're looking at, whether or not the momentum can shift for many of the once high flying stock names in chips and whether or not that bodes well for the overall sector >> well, yeah. there is no doubt the brush fire really has been the china-u.s. trade war. in a bigger worry is if you look at semi and that trade, there is risk in terms of u.s.-china as well as just overall valuations. that brush fire is spreading i think you're looking at the names and how they react over the coming weeks you look at inventory levels and what happened on the smart phone side from a leader perspective, semis
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are front and center that is causing investors to worry on tech stocks ultimately, 3% to 5% down side on tech or more. they could be 15, 20% higher by year end >> see if technology can resume that crown of the best performing sector this year. thank you very much. we're all over the global market turn around coming up next, more on the big about-face in asia you can see there, green arrows across the board we're headed life to singapore with the latest. plus, some big money advice from jim cramer why he says today could be a massive buying opportunity we're going to bring you his comments as we head to break, a staggering stat for your money this is officially the worst october start for the u.s. markets in a decade. stick with us. this special edition of "worldwide exchange" will be back right after this break. cal: we saved our money and now, we get to spend it - our way.
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that sent. is playing out in europe right now. trading is active. .5% gains by the major indices. in asia, we did see a little bit of that theme play out as well the benchmark composite is up. the nikkei in japan is up by .5% so let's dig into that overnight action in asia joining me now from singapore is sarah lien, a client portfolio manager at east spring investmeinves investments. sarah, is the u.s. still the primary driver of a lot of the activity for management of assets in asia >> you know, i think we really do have to look outside the u.s. and look at china. i mean, we see what's going on with china and the u.s. in terms of the trade wars and china
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drives a lot of what goes on in this region, in fact if you look at the exports of china to the u.s., they're only about 7% so all the hubbub and talk about the trade wars really only scratches the surface. now granted it's a very, very large surface. so the bulk of trade from china is actually done with other partners within asia so we're very aware of the renal region as a whole and not focusing just on the u.s. as ke the key driver >> how important are relations when you look at investments at this stage we're talking about the two biggest economies in the world they affect many investmentis the no matter where you are. as a portfolio manager, is it front and center for you >> you know, we feel like the trade tensions are a lot of noise. it's driving the market in a lot of ways. it is a very sentiment driven
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market in asia and in europe, its a domestically driven market and very retail oriented there is a lot of macronews and people trade around macro more than fundamentals. if you look at the region and the trade wars, it's not that meaningful we prefer instead to focus on what's going on within china domestically if you look at the chinese consumer, there is huge opportunity there. the chinese consumer is very strong we see a big trend toward premiumization so think about things like gyms and cinemas and air travel only 9% of the chinese population even has a passport so there is a huge growth opportunity there that really has nothing at all to do with trade wars and very domestically driven so we think that that story is only at the very, very early stages >> we heard so many negative comments and data points about the economy in china
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it is slowing down that they are being hurt more than many had expected because of the continuing trade tensions and perhaps a global slowdown. is that something that worries you? the china economy and the strength versus its peers around the world? >> not so much the china economy has slowed i think that's actually a good thing. it's very much driven by the quality of growth as opposed to just growing for the sake of growing. so that's actually quite good and should have long term positive effects on the overall chinese economy that it doesn't get ahead of itself. we're still looking at 6.5% growth depending on whose estimates you used you're hard pressed to find that level of growth anywhere else outside of china and asia. so we still think that growth looks very good. sure, it's lower than what it was a couple years ago but it's certainly still very high. >> all right still constructive on the overall economy in that greater china region
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sarah, thank you so much for joining us this morning on "worldwide exchange. >> thank you >> and don't miss a first on cnbc interview with treasury secretary stephen mnuchin. that's this morning, 7:00 a.m. eastern time on "squawk box. i'm sure china, trade, and everything else with tariffs will come up in that discussion. next on this show, more on today's major relief rally on wall street. the dow pointing to a more than 300 pop at the opening bell. we'll find out what is driving this big come back the energy market rebounding this morning we're going to drill down on what's next for oil prices and watch gold prices as well. the metal coming off the best day since the 2016 brexit vote stick with us. worldwide exchange will be back.
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bouncing back. wall street in rally mode following two days of massive selling pressure if you are just waking up or heading into work, let's get you up to speed on markets futures pointing to a 300 point open after the index tumbled 500 points yesterday bringing two day losses to more than 1300 points oil prices also catching a bit of a break after weaker days wti futures $71.50 up by .75% so let's talk about the energy market right now joining me now is the global head of commodity strategy at
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rbc capital markets and also a cnbc contributor oil prices, is it about the supply side of things right now? i mean, we are seeing a bit of a bid here but what is the primary driver >> i think part of the primary driver this morning is ahead of the iea was out saying expensive oil is back. they took down the demand outlook by a bit for next year but they're really warning about potential supply conscious as we go into the back half of this year the beginning of next year >> how important is iran to this discussion >> iran is hugely important to this discussion. we have a situation where venezuelan production continues to decline we have a u.s. administration that continues to say we want to take iran exports to zero. now they're not going to get iran totally out of the market but we're likely to see a million barrels of export out of the market by year end >> the u.s. side of things, we did see inventory data that shows a built. that puts pressure on prices, especially for wti >> right and we're in maintenance season. we're in a soft path in terms of season alt that is part of the reason why
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we're getting the bills. we get bills this time of year because of maintenance with refineries the question is what happens sort of end of november when we're coming out of minute tennance season a -- maintenance season >> what is the most important hot spot that you're watching right now? is it the u.s. inventory picture? is it iran saudi arabia what is happening in africa? what exactly is the thing we should be paying attention to? >> i worry about the stories that we're watching, the unstable suppliers so if you have venezuela continue to decline, a million barrels barrels off the market, you can't afford to lose another major producer so continue to watch libya as they go into elections the production has come back but they're very volatile. nigeria, they have elections in february another country where production swings wildly, they can swing by 800,000 barrels. the two countries can play a big role in terms of where we go for prices >> i have ask you because in your role you have to be aware of the oil price dynamics and
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the geopolitical and political issues as well saudi arabia has a problem, an image problem right now for a number of reasons. and not the least of which lately you is what happened to jamal and his alleged murder what exactly is that doing to the kingdom and how is that dynamic changing what could be a more stable market for oil >> i mean he was very well known in the united states he had been here with the saudi embassy. he was living in the united states for the past year he had a lot of friends in washington he wrote for "the washington post." this is very serious implications for the investment climate in saudi arabia. >> we already heard some ceos including uber saying he may not go >> a number of, you know, officials that we're going to speak there are pulling out. there is also the issue of the u.s.-saudi relationship. now president trump spent a lot of capital on him. he made the first foreign visit
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to saudi arabia. but you have the u.s. congress, both sides of the aisle saying this is entirely unacceptable. so you should watch for potential pressure from congress to restrict, for example, arms sales to saudi arabia. now president trump doesn't want to do. that congressional action, they could take the lead on this congress took the lead on iran congress is pushing the issue of russia very seriously on sanctions. so congress could be the biggest problem for saudi arabia >> rbc capital markets, thank you so much for joining us >> thank you coming up next on the show, continuing coverage of this morning's big bounceback it's a sea of green from asia to europe to right here in the u.s. how you can trade that turn around and as we head out, a look at the s&p 500 sectors in correction after yesterday's massive drop stick around "worldwide exchange" will be back
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♪ ♪ comcast business. the company that delivers unrelenting speed in more places. is also the company that's redefining what a provider provides. comcast business. beyond fast. count dwrodown to a comeback global markets are in rally mode this morning so is the all clear signal there and is it time to get back into the market we're going to debate it it is friday, october 12th, 2018 you are watching "worldwide exchange" on cnbc. >> good morning.
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welcome to "worldwide exchange." i'm dominick chu brian sullivan is on assignment. wall street rebounding in a big way following two intense days of selling stock futures right now pointing to what could be a 330 point opening if these gains carry into the opening bell. the s&p 500 up by 37 you can see the shanghai is up by 1% and nikkei and japan up by .5% as well in europe, we're seeing gains there although fractional. you can see the ft-se 100 up by .75%. the german dax .5% we have seen a little bit of marginal acceleration for the gains in the last half hour. if we take a look at the hot spots in our own market, during the market stress, we were talking about this idea that many safe havens haven't been seeing the bids we would expect given the market stresses. one thing that we were watching in trading throughout the course of this week was the gold trade.
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as can you see here, going into yesterday's trade, gold miners accelerated while the markets were selling off indicating perhaps a sign that gold prices were catching a bid in those gold miners benefiting from them also watch what happened with the japanese yen it didn't move as much as we thought it would to the down side that is dollars versus the yen however in trading yesterday, we did see an acceleration of recent trends where they sold the dollar off and bought the safety of the japanese yen so all of the factors in play right now. what should your playbook look like safety play? cyclical trade jim cramer says now might be the time to get back into the markets. here's what he said last night on cnbc's "special report. >> i think the time to really be aggressive in selling happened and if we get anything good out of china, carl, if we get any
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news that agrees with my view, we're going to say why didn't we do buying? good things happened periodically >> all right so joining us now is michael pervis, the chief global strategist and head of equity derivative strategy and director of research at jenny montgomery scott. we start with you, michael was this process that just happened over two days the all clear signal look, the knife has fallen fast. you always want to be careful about catching that falling knife before it really bounces off the floor a little bit i think the price action we've seen is, i don't want to say textbook, but it feels good, righting you know, we'll probably generally what i'd like to do is see it rally a little bit and then go back and test the levels and then you get -- you look at the other cross asset signals, for example.
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the yield curve starting to deinvert and i'm looking for stability in the treasury yield curve to give that sense of, you know, bond rates are not just going to the moon overnight which i don't think they are but that's going to give some comfort, i think, that, yes, we can go ahead there and, of course, the elephant in the room is earnings which are just going to be around the corner >> dan, one of the things i hear often when we talk about, you know, these -- is the bottom in? are the points clear is this the all clear signal bottoms are processes and not just points on a chart so from a strategy perspective, is this bottoming process more in the early stages or perhaps one that we can say, hey this is a time to get back in the markets? >> yeah. that's a good question i tend to go with the theory that, you know, bottoms or correction cycles are a process. and i'm not convinced that with the last two days we necessarily saw a bottom here. i agree that the markets come into this morning very oversold.
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you can see overseas mashrkets were oversold. over the last several years, bottoming process and u.s. markets when you want to see capitulation like this, it almost comes in two or three stages and it can be very rapid but i think we have seen our first wave down. you're going to get some recovery you can get a very sharp rally even push close to the recent highs. take another leg down. and then possibly even a third leg down now the key there is that with each successive leg down from here, again, it can be a span of days or weeks. you're going to see selling pressure continue to dry up with each leg down. and that's what we would consider a positive divergence it means that the cycle is exhausting itself or exhausting the sellers. so, again, i'm not convinced that we necessarily have seen the bottom i would agree with most folks that the markets are probably
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due a snapback rally but we can see more pressure here obviously, longer term we align with a lot of other folks out there thinking the markets are in good shape. we're in a secular bull market the economy is strong and we're seeing an expansion cycle here obviously, the corrections can always hit bull markets. they're notorious for the types of volatile periods, even passive bull markets and so i think, you know, what we're telling investors is, hey, of course watch for snapback rally. watch for some relief here but let's still be a little bit cautious we may get in actually better levels in the days or weeks ahead. >> all right so, dan, that is his strategy. michael, what is yours this is your job you're going to advise clients today about how they should either be deploying money, not deploying money, using different times of derivative instruments, different strategies what you are telling them is the playbook for the coming days and weeks? >> my playbook right now is, look, i don't think you have to
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do anything just today you can certainly nibble on stuff here i think what dan is saying is right. this is a process that can unfold over a longer time period i think in this particular case, it's going to be a pretty short time period. there is a few reasons why i say that one, i think the earnings are likely to come in strong here. right? the economic data that we had since q-2 is really strong here. and so i don't see any reason why to think that this season from a top down level is going to be, you know, particularly bad here i also point out if you look at valuations whether you look at the f-a-a-n-g index or the russell or spx or dow, it's actually right now lower than it was during the worst part of the spring during that volatility. and i think that's -- so the whole argument that the markets are priced to perfection, i don't think they were a week ago or three weeks ago but there is certainly a lot more attractive right now. and another -- i think so, you
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know, here we are if we do rally into -- let's say we get another -- we're up two or three points and one of the glorified relief rallies, but if we're talking about this conversation around, you know, the end of october, early november, you know, the market is up 5%, 6%, 7%, then you have a lot of people still behind the bench marks. and that sort of seasonal chase comes in so i think there's, like, you know, usually it's never a v bui but i think this condition is going to be a faster recovery than what we saw unfold in february or march. >> dan, a couple moments left. what would go on your shopping list if this process bottoms out and we start to turn higher again? >> that's -- a number of things. we like health care here and not health care just as a defensive. i understand that it's working very well. but there is growth in the broader health care sector that would be anything from, you know, gene therapy, biotechnology, bioproduction we would also look to consumer
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discretionary. we would look to industrials which have been acting very well and finally, financials. i've been a holdout. i've been rooting for financials and banks for quite some time. but i do think that with the ten year finally breaking above 310, i think yields will continue to press higher not necessarily over the short run but on a longer term basis i think that can drag financials and banks higher remember, banks are pretty big component of the s&p 500 so if they start to do well, they could do some heavy lifting in the broader bench marks i would add financials to that list as well >> got you all right. michael pervis and dan, thank you very much for joining us and we're all over this big turn around in the markets up next, we're hitting the emerging markets what today's massive come back means for the developing economies. stick with us. "worldwide exchange" will be back after this break.
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we had been seeing an acceleration of sorts in those gains about a .5% and that is just a half hour ago for the ft-se 100. now up close to 1% the emerging markets is down 3% over the past two sessions you may have expected more of a drop amid this global market route. so what is happening and, jeff, the emerging markets action has been curious for a while. everyone's been looking for a bottom is that bottoming process in place and is it safe to maybe look back at some of the emerging markets assets? >> i think it is safe to take take a look here you certainly have to understand where we've come from. 2017, what a phenomenal year it was for this etf it's up 30%. so now year to date, yes, it is down 60% the thing about the sensitivity
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and emerging markets have to raising rates. for the first time we've seen it hit 3.5% i think when you see the composure that we're having, think about it, 30% of this is to china so of course it makes sense and down year to date. all the sensitivities to the trade tariffs. if you look at the top holdings in eem, nearly 4 4.26% i think it makes a lot of sense as this trade tariff conversation is bubbling a bit em has offered a discount under $40. this morning we're seeing a rebound as well as rates subdued a little bit i don't think the volatility in the emerging markets is over by any means, dom >> all right let's put that futures now hat on, jeff the future is very unclear for china and manufacture ty of the markets. how is it we can say the emerging markets index is worth investing in right now if we still don't know how 30% of that index is going to fair given
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trade and tariff talks >> great question. i think that is a certainly emotional conversation when it comes down to it, you boil it down, the actual exposure of the trade tariffs, a couple hundred million dollars worth, i don't think it has that influence on the global markets that perception is so remove the emotion. understand the exposure that you want to have if you look at international, if you look at emerging markets, they are on a deep discount. yes, we will have continued movement in the ten year note and the u.s. dollar to the upside obviously that's going to put pressure here. i think after a 16% down draft in eem, it is presenting value i think the whole conversation regarding president trump and china and the trade tariffs, i think it is overblown. i don't think it affects that market >> one question here is that a trade or an investment >> i think it's sluabsolutely b. yes, the chart is broken and the 50 day is broken i think it's a short term trade.
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long term exposure you want to have exposure to china. yes, they're lagging a little bit. the data is pointing to the fact that they're not going to be as sluggish as the perception on the street is. >> okay, thank you so much for the early wake up call this morning. we're gearing up for another big day on wall street as we've been saying all show, let's bring in becky quick at the nasdaq becky, we're not terribly surprised that we could see a little bit of a relief rally given the damage that we've seen what is curious is some of the upside stocks moving, you know, in this morning's trade premarket. they're some of the ones that got beat up the most over the course of the last two days. >> yeah. not a big surprise dom, the issues that you've been talking about this morning, the issues you were just discussing are the things that the market is still trying to figure out. is the fed going to raise rates more actively? that's been the huge issue what's going to happen with the china tariffs? what's going to happen with the dollar, and what are we going to hear in earnings those are the big questions, right? did i kind of assess that? >> absolutely right. >> do we need to hear more >> what you brought up, the earnings picture, we haven't
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talked nearly enough about on this show. i know you'll do it a lot more but we're starting earnings season today >> that's my point every single point that i just talked about, we're going to address on "squawk box" this morning. you'll hear directly from the sources that can give us the closest answers on these things. let's start with the fed fed is the big issue are they going to raise rates? guess what charlie evans is on "squawk box" this morning at 8:30 eastern time steve liesman is there with the chicago fed head we're going to hear from him exactly how he thinks all of this market reaction has been. is it something that makes sense or does he think it's an overreaction we'll get his take on what is happening with that. then you want to know what is happening with china and the trade tariffs, guess who else we have on the show the treasury secretary he is in bali at the imf annual meeting. jeff cutmore is there and he'll bring us an interview with the treasury secretary so we can touch on all of those issues as you mentioned, earnings season under way guess what we're going to hear from the big bank this is morning on "squawk
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box," j.p. morgan, citigroup, wells fargo and pnc reporting before the opening bell. we'll bring ut numbers and let you get a real good idea of what the ceos are saying in terms of the outlook and what they're anticipating those are the big clues to where we're going to trade we'll be all over it today right here on "squawk box. >> a lot of must see interviews as always on "squawk box." thank you so much. we'll see you in a few minutes here coming up next on this show, more on the massive turn around effort on wall street with the dow pointing to a triple digit pop right at the open. plus, as becky mentioned, we're counting down to that big banks earning season kicking off with j.p. morgan, wells fargo and citigroup reporting results hours from now. could earnings after that major market come back stick with us. orwi ehae"ilbe right back so the only thing that we can do to make sure that we get there safely, and that we leave that scene safely and go home at night, is train. and we train all the time in the fire service.
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leslie picker is here to tee us up for the big earnings report. >> an hour from now, we're expecting j.p. morgan to report followed by citi and wells fargo around 8:00 a.m. the volatility should benefit the bank's equity trading business we'll be looking for comments on that from the conference calls but during the third quarter, trading expected to have been pretty muted and analysts and investors are concerned about loan growth. and if it's weak, that may outweigh any positive boost to the banks may get from higher interest rates banks benefit from rising interest rates because they're able to charge higher interest on the loans they make to consumers and usinesses. now the street's consensus is that earnings per share at all three banks will be higher this year than last year. and that the combined profits within the industry may be a
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post record high that said, the kbw bank index is more than 5% lower year to date compared with a 2% gaughan in i s&p 500. price to earnings basis are below crisis averages leading some to believe that decent fund ales could -- emphasis on could -- jump-start the shares higher >> you're telling me you don't have a crystal ball. >> i don't. >> i don't blame you but even if i did, i couldn't say it here. >> all right stick around, please right now we've got rising rates, of course, a major factor for the big banks. joining us now is boris rigevinski boris, we know that you're not a stock guy. we're not going to pound you about the banks. >> thanks. >> but the interest rate story plays very prominently into how the banks make money so what is the forecast or what is the playbook for how rates are going to develop in the next coming few days or weeks >> yeah. absolutely and i happen to work for a large
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bank i'm happy to hear the things leslie had to say. the interest rate environment is incredibly important for banks our flaorecast is favorable for financials we're looking for a steeper yield curve. generally banks, i know i'm oversimplifying, but they borrow short and they lend long so high rates is a good environment. >> as we talk about the hot spots or the points that you're watching, over the course of the past few days, amid the market stress, the argument has been made there should have been a bigger bid for treasuries given the stresses in the marketplace s that something you were watching did you feel as though the ten year and 30 years reacted the way you thought they were going to react given the rest of the m rachmacro picture around the wod >> should there be a bigger dip? maybe. it's not about demand but it's about supply the supply story is in treasuries it's very interesting. as you know, the government is going to go to $1.1 trillion in
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deficit this year. this he have to borrow a lot we think there will be a big pop in borrowing in q-4. i think investors are aware of the fact that there is a lot more treasury supply coming down the line even if they -- even if they like yields where they are right now. >> treasury supplies are one thing. manufacture the ban many of the banks are primary dealers. they have to bid because of the relationship with the fed. >> that's right. >> and j.p. morgan, citi, all the -- they're some of them. so as we talk about these. we often talk about investment banking. what about the trading operations for the fixed income? they've always been a hot spot for many of the banks. >> they have, although during this quarter a lot of analysts are expecting that to be not the key driver of earnings per se, so that is something to keep an eye on it is something that we look for in all of the various conference calls, all the commentary especially as we make our way into the fourth quarter and try and get some idea of what that could fportend for the banks an
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markets. so in some ways, you know, they kind of beget the rest of the earnings season. >> should we still look, leslie, at the net interest margins, the nims boris is talking about this lend, you know, borrow short, lend long. that is the profitability for a bank is wells fargo still the one we would look at as being the most exposed to that net interest margin story you >> nim is a big story for the quarter, indeed. you're right, wells fargo is something that we should -- one that we should definitely pay attention to when it comes to nim. analysts are looking at that very closely they're expecting a pickup but, of course, like i said, the valuations for these banks are very depressed so any key indicator like nim will be one that could help catapult the stock prices higher >> just a couple seconds left. the ten year where do we see it in the next week or two? >> 335 by the end of the year. we'll see a gradual shift from where we are around 320 to 335
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we see it going to 370 in 2019 >> boris, thank you so much for joining us and leslie picker for that big banks earnings preview. thank you for that call this morning. that does it for "worldwide exchange." coming up, "squawk box" picks up the continuing coverage of markets in turmoil after this quick commercial break and the dow jones industrial average right now slated to open up by 308 points the s&p 500 by 37. and the nasdaq by 1 5 51 it could be a very big day for wall street. keep it right here do you hear that?
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good morning i guess it's a comeback. you can call it a dead pet rock bounce since we don't think about any animals. dow futures indicating a 300 point rebound at the open. small consolation after nearly 1400 point drop in the last two days the relief rally is spilling over the official start to earnings season is just 45 minutes away when j.p. morgan reports is it time to buy or should you be selling into this because there probably will be more volatility, right because of the next statement october 12th
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>> something about the teams and october. anyway, 2018, you into you that. "squawk box" begins right now. ♪ baby come back any kind of fool could see ♪ >> live from new york, where business never sleeps, this is "squawk box. >> good morning, everybody welcome to "squawk box." we're live from the nasdaq market site in times square. i'm becky quick. our guest host for the hour is charles campbell, trading desk specialist at mkm partners gra et great to see you let's get into what is happening with the markets the rebound. first a look at how we got here. the major averages, each fell 5% over the last two days the dow was down another 546 points yesterday after falling more than 800 points on wednesday and most of that activity came at the end of the session. however, things are turning around this morning. take a look at the u.s. equity futures. you'll see that right now it looks


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